Correlation Between Pembina Pipeline and TC Energy

Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline and TC Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pembina Pipeline and TC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pembina Pipeline Corp and TC Energy Corp, you can compare the effects of market volatilities on Pembina Pipeline and TC Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pembina Pipeline with a short position of TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and TC Energy.

Diversification Opportunities for Pembina Pipeline and TC Energy

-0.66

Correlation Coefficient

Pembina Pipeline  TC Energy

Excellent diversification

The 3 months correlation between Pembina and TRP is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Pembina Pipeline is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pembina Pipeline Corp are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and TC Energy go up and down completely randomly.

Pair Corralation between Pembina Pipeline and TC Energy

Assuming the 90 days trading horizon Pembina Pipeline is expected to generate 9.94 times less return on investment than TC Energy. But when comparing it to its historical volatility, Pembina Pipeline Corp is 1.81 times less risky than TC Energy. It trades about 0.04 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,776  in TC Energy Corp on September 25, 2024 and sell it today you would earn a total of  861.00  from holding TC Energy Corp or generate 14.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Pembina Pipeline Corp  vs.  TC Energy Corp

Pembina Pipeline Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

TC Energy Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TC Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pembina Pipeline and TC Energy

The main advantage of trading using opposite Pembina Pipeline and TC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline position performs unexpectedly, TC Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TC Energy will offset losses from the drop in TC Energy's long position.

The idea behind Pembina Pipeline Corp and TC Energy Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.